2. Different persons get different wages depending
upon the nature of job, skills of
person,sex,region, employers capacity to
pay,demands and supply of labour in the market.
This relative difference in wage level is called
wage differential.
CAUSES:
Imperfections in the employment market, e.g. lack
of knowledge of workers i.e. alternative job
opportunities available elsewhere.
Social value and prejudices like
gender, age, status, ethnic origin
Difference in degree of skills required to perform a
job.
3. TYPE OF WAGE DIFFERENTIALS
Occupational wage differentials:
1. different occupation requires different qualifications,
skills and carry different level of responsibilities
2. Wages are generally fixed on the difference of
occupation and various degrees of skills.
Inter-firm Differential
1. When workers in the same occupation and same
area are paid different wages in different industries,
it’s result in inter-firm differential.
2. This type of differential is caused by, difference in
the qualities of labour employed by different firms,
difference in efficiency in equipments, financial
capacity of employers, age and size of the firm,
managerial efficiency etc
4. Regional Wage Differential:
1. When workers engage in same occupation and
working in the same industry but in different regions
get different wages, it is called geographical or
regional wage differential.
2. This is due to difference in living and working
condition, climate, isolation , cost of living
etc, difference in the prosperity of regions(western
part have higher wage rate)
3. Again with in the region also there is a difference in
wage in certain pockets due to some of the pockets
are backward in nature.
Sectoral Differencial:
1. When workers in the region employed in different
sectors(industrial, agricultural and service sectors)
gets different wages.
2. Low wages fixed up for agricultural sectors.
5. FACTORS INFLUENCING WAGE DIFFERENTIALS
Demand and supply position of workers
in the labour market,
Relative bargaining power of the labour
union and employers.
Comparative wages paid by same
industries in the same region.
Difference in productivity of labour
Ability of the firm to pay its workers.
Government policies on minimum
wages.
6. PRINCIPLES OF WAGE DIFFERENTIALS
Wage differential have a great social and economic
significance as they are directly related to allocation
of economic resources of a country.
Commensurate with nature of job
Equal pay for equal work(avoiding discrimination
on the basis of colour,gender ,age.) (equal
remuneration act provide for the payment of
equal remuneration to man and women for the
same or equal work)
Incentive for improving skills and efficiency.
Wages to attract workers.
7. PURPOSE OF WAGE DIFFERENTIALS
“Fair Wage Committee” recommended that wage
differential based on
1. Degree of skill required
2. The strain of work
3. Experience involved
4. Extent of training required
5. Levels of responsibilities
6. Mental and physical exertion
7. Fatigue involved
8. To induce employees to learn and acquire new skills
To shift employees a new industries
PURPOSE OF WAGE DIFFERENTIALS
To motivate employees to accept more responsible
jobs/positions
To undertake economic and social welfare activities.
To increase the pace of economic development
1. Cause labour to allocate among different
occupation, industries and geographical
area in a country in such a manner as to
maximize national product,
2. Enabled full employment/utilization of
resources
3. Facilitate the economic growth
10. INTRODUCTION………
Executive Compensation or managerial remuneration is
how top executives of business corporations are paid
Managers are very short in supply
, therefore, organizations are competing with each other
to attract , retain and motivate leader managers for their
strategic requirement
Higher managerial post like presidents, vise-
presidents, directors, general manager etc
11. CONCEPT OF EXECUTIVE COMPENSATION
Higher management salaries are influenced by the size of the
company , performance of the company.
It can’t be compared to the wage and salary schemes meant for
other employees in organization.
Executive are denied the privilege of having unionized strength .
secrecy is maintained in in respect of executive remuneration.
Executive pay is not supposed to based on individual performance
measure but on unit or organizational performance.
COMPONENTS
•Salary & Allowances
•Bonus
•Incentives
•Perquisites
12. SALARY FOR EXECUTIVES
Salary is basically determined through job evaluation and
serves as the basic for other types of benefits , but in
managerial compensation job evaluation plays only a part
and not represents the whole truth
A manager is paid for his capabilities and for the job he
performs , rather than only job demands . This is the reason
why the norms of wages and salary fixation are generally not
observed while fixing the salary of the manager
Salary of the managers varies by the type of job , size of
organization, region of the country and type of industry .
Salary makes up of about 40 to 60 % of top managers annual
compensation but it is not significant , as it is subject to
deduction at source and is also kept by government
regulation . In order to avoid such deductions and sealing ,
managers are offered incentives and attractive perks
13. SALARY is supposed to be determined through
COMMUNICATION
COMPONENTS OF EXECUTIVE
determined through evaluation and serve as a
basis for other type of benefits
BONUS plays an important role in today’s
competitive executive payment programme.
If bonus constitutes short term benefits, stock
option are long term benefits offered.
straight salaries, bonuses, stock purchase plans
and profit sharing are used to compensate senior
executives.
The salary is determined by mutual agreement
between the employee and employer.
14. LONG TERM INCENTIVES/STOCK OPTIONS
Ifbonus are short term
benefits , stock options are
long term benefits offered
to managers
oCompanies allow managers to
purchase their shares at fixed
position but Stock options are
valuable as long as price of the
share keeps increasing .
15. BONUSES AND EXECUTIVE COMPENSATION
Bonuses related to performance also aid to executive at a
certain percentage of profit.
The average bonuses may range from 30% -35% of salary.
This increase the motivation level of executive.
EXECUTIVE & FRINGE BENEFITS
Special benefits for executives that are usually non-cash items.
For example: companies provide health club memberships
with personal trainers; discounted company products;
automobiles and leases; country club memberships; first class
airfare or use of the corporate jet; executive health plans;
personal car service; personal computers and cell phones etc.;
entertainment; financial planning assistance etc
16. As with benefits for non-executive employees
BENEFITS FOR EXECUTIVES
, executive benefits may take several forms
, including traditional retirement , health
insurance vacations and others .
Executive compensation may include other
benefits which other employee do not receive
Executive health plans with no co-payments
and with no limitations on deductible or
physical choice are popular among small and
middle sized business
Trust of various kinds may be designed by the
help the executive’s to deal with estate issues
Differed compensation offers another possible
means of helping executives with tax liabilities
caused by incentives compensation plans
17. UNIQUE FEATURE OF MANAGERIAL REMUNERATION
Managerial remuneration cannot be compared to wage and
salary schemes meant for non-managerial employees in
organization . Factors and variable are more numerous in
managerial jobs and simple comparisons and ratings are not
possible .
Managerial are denied the privilege of having unions and
collective bargaining . Their competence and contribution
are the strengths for determining their pay package .
Secrecy is maintained in respect of managerial
remuneration . This is done because no two managers in the
private sectors, in the same grade receive the same pay.
Compensation and reward depends upon such factors as
competence , length of service , contributions, and loyalty
to the company .
18. UNIQUE FEATURE OF MANAGERIAL REMUNERATION
Managerial pay is not supposed to be individual
performance measure but rather on the unit of
organization performance . This is because a managers own
performance is assumed to be directly reflected in measure
of units of corporate performance
Managers compensation is subjected to statutory sealing.
As per the latest guidelines , monthly salary varies from Rs
40,000 to 87,500 subject to an overall limit fixed per
annum including perquisites .
Finally theoretically, remuneration of managerial personnel
is supposed to be guided by job description , job
evaluation, salary grades with ranges of pay in each grade
and salary surveys .But in practice norms seem to have
thrown to winds and exorbitant amounts are paid to
decision makers in organizations. The annual salary of Ceo's
range from Rs 50 lakhs to few crore
19. WHY MANAGERS SHOULD BE PAID MORE
Managers have intensive worth and hence command hefty
premiums .
The managers drive himself to success in his or her role is
creating the mean by which certain organizational goal is
achieved . The financial reward is a symbol of managers role
itself , its power , its dignity and its freedom
The class of people called manager are always in short
supply. One must pay heavenly if one has to attract and
retain talented and competent individual
Having succeeded in retaining them , the manager must be
motivated for better performance and it is the money which
motivates employees and managers are no exceptions .
The lifestyle that fits his status and job requires considerable
amount of money. To a worker , the wage is a mean of living
but for a manager financial reward is a symbol of social
prestige and position .
It is to eliminate or at least minimum corruption . The best of
satisfying greed is to pay well .scans and scandals cost the
organization irreparably
20. MYTHOLOGIES-CUM STRATEGIES FOR MANAGERIAL COMPENSATION
Salary/basic salary/consolidated salary continues to remain a
major component , though salary scales are often discarded
these days or used only as guides. It is the performance
contribution that determines the pay and future revisions,
which vary widely from individual managers .
Grade wise flats allowances are being consolidated , except
where tax exemption benefits are available . Allowances may
be linked to the salary as a percentage or by slabs , but
preferences is for flats amounts , which do not increase
automatically and increase at the discretion and therefore
controllable
Reimbursement of expenses incurred on company's work
has been limited , and that in line to conform to the tax laws
. Being actual in most cases , they are not considered as part
of compensation , unless it is provided towards personal
benefits .
Annual –payments –bonus or commission and leave travel
are common features. Some tax relief applied for the latter
21. Benefits generally comprises of furnished or unfurnished
company owned or leased accommodation , use of
company owned or leased vehicle , medical coverage ,,
covering provident fund, pension, or superannuation and
gratuity , post retiral medical assistance , easy loan scheme
or utility items or vehicle , furniture or utility items , etc,
renting employees owned housing , club entrance fee
reimbursement , etc . Minor benefits could be provision of
security , drivers , gardening, assistant, sales of products or
assets at the concessional rate , the relocation and transfer
expenses , including admission etc, fees for children , credit
card fees, phones etc.
Most of the companies are now moving away from
traditional compensation package (basics, DA,HRA etc) to
cost of company basis. Companies are talking in terms of
gross salary and asking managers to do their own tax
planning
22. Some of the companies give their managers
freedom to design package keeping in view of total
cost . It means giving managers the flexibility to
choose lifestyles of their own living within the
certain parameters .
Performance linked payments+Bonus+generous
increments +merit awards are increasing . The
trend is to move away from seniority and hierarchy
system and attach value to performers. The
concept of star performers are giving ground.
Lifestyles perks( good accommodation, club
membership , liberal furnishing , holiday abroad
with family ) continues to be the practice even if
these are taxed.
23. NEW WAY OF PAY
Against changing patterns , organization are increasingly
linking their variable pay plans to individuals , teams and
organizational performance. the extent of linkage and the
nature ( short/long term) varies for different levels within
the organization . Some of the variable pay plans ( VPPs) that
organizations have successfully implemented include
individual/team performance based gain profit sharing
, productivity based business individual /team performance
, based gained profit sharing , productivity based business
incentives , stock options , and ownership and other
customized schemes .
While long term incentive plan is a good mechanism to link
organizational objectives to individual rewards . The
feedback is that organizations with strategically aligned
variable compensation have experienced a positive impact
on individual as well as organizational performance .
Companies have leveraged the variable pay to aggressively
position their top performer at the top end of the market
24. Increasingly , companies are experimenting with the
“cost to company "concept , with focus on higher rich
compensation structure. New and emerging sectors
like retail , telecom, aviation and IT/ITES which have
the advantage of no legacy issues and also have
younger employee population . Tend to adopt
simplified structures at the outset
Another concept gaining popularity due to changing
tax environment is the flexible salary structures where
the employee has the freedom to choose from the
defined menu of items of pay and optimize his/her
own tax planning . This works in a win-win manner
and has increasingly gained acceptance as it provides
flexibility to the employee and tax compliance to the
organization
